Analyzing Cryptocurrency Volatility: An EGARCH Model
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The aim of this article is to examine the reasons why cryptocurrency volatility hinders its potential to replace fiat money as legal tender. We focus on Bitcoin and Ethereum for this analysis. By applying an augmented Dickey-Fuller stationarity test, we demonstrate that cryptocurrencies lack a long-term trend; instead, their movement is erratic and highly volatile. Furthermore, eGARCH models indicate that volatility tends to decrease and is expected to persist in this pattern. In summary, theoretical and empirical analysis suggests that, due to their nature based solely on supply and demand and their high volatility, cryptocurrencies are not suitable as primary investment instruments or stores of value.
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Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial-SinDerivadas 4.0.
Contenido principal del artículo
The aim of this article is to examine the reasons why cryptocurrency volatility hinders its potential to replace fiat money as legal tender. We focus on Bitcoin and Ethereum for this analysis. By applying an augmented Dickey-Fuller stationarity test, we demonstrate that cryptocurrencies lack a long-term trend; instead, their movement is erratic and highly volatile. Furthermore, eGARCH models indicate that volatility tends to decrease and is expected to persist in this pattern. In summary, theoretical and empirical analysis suggests that, due to their nature based solely on supply and demand and their high volatility, cryptocurrencies are not suitable as primary investment instruments or stores of value.
Detalles del artículo
Esta obra está bajo una licencia internacional Creative Commons Atribución-NoComercial-SinDerivadas 4.0.